Budgeting For Christmas

We've all heard about the Starbucks effect on our budget. There are lots of little, possible unnecessary, expenses nibbling away at out finances that we have to keep in check. What we might hear about a little less often are those big, unusual expenses that might destroy a whole year's worth of responsible budget management. As my Great Uncle Sylvester used to say, "You can write a great sentence, but you want to end it with an exclamation point, not a question mark."
I understand the reasons that people fall into these financial traps. When you're in the midst of a Christmas shopping trip, the last thing you want to do is put the brakes on the festivities by worrying about money. What are you going to do-- tell the kids that Santa ran out of money?
The answer to this problem, like so many others, is to put a little bit of forethought into your special plans. As I've written in the past, many people are afraid to plan and stick to a budget, because they read between the lines and see that some self-sacrifice is required. That's not necessarily true. The reason to plan the finances of your next Christmas or other big event is just to make sure that you're getting good value for your dollar.
The first step in making sure that Christmas doesn't break the bank is to plan in advance. Typical families charge their credit cards up during the month of December, and then try to catch up by the end of January (or maybe by next September, in some cases). The immediate problem with this is evident in the financing. Let's keep the math easy, and say that your Christmas costs $1,200. If you start to save for Christmas during the previous twelve months, you're actually earning interest on an average of $600 for the year. That might amount to $24 or so. On the flip side, if you take a year to pay it off after the fact, then you'll be paying interest charges on an average of $600 for the year. How much that actually costs you depends on your interest rate, but if it's 15% or so, then you'll wind up about $90 extra in the hole.
You see the point. At the end of the year, Christmas is costing you $114.00 more than it has to. You're paying over a hundred extra dollars for the same exact experience. By simply planning and adjusting your game plan, you can get your $1,200 Christmas for $1,086.